Rs 5k Or Rs 50k SIP: Which Will Make You More Money?

When it comes to building wealth, Time really is King. The power of compounding is what makes the magic happen, says rediffguru Ramalingam Kalirajan.

• You can ask rediffGURU Ramalingam Kalirajan your questions HERE.

When it comes to investing, we often face this fundamental question: 'Is it better to invest smaller amounts consistently over time or make larger investments for a relatively shorter period?'

It's a dilemma that many of us struggle with, especially when we think about how much to invest and how long to keep at it.

But what if the real secret lies not just in how much you invest but for how long you stay invested?

Let's explore a comparison between two SIP strategies and see what gives you a higher return in the long run.

Can small investments over a longer period of time beat larger investments in the short term?

Imagine this: You begin with Rs 5,000 a month and stick to this plan for 33 years. It may sound like a modest start but, over the years, you may be surprised at how much this relatively small amount can grow.

What will a Rs 5,000 monthly SIP for 33 years yield?

• Investment duration: 33 years
• Monthly SIP: Rs 5,000
• Total investment: Rs 5,000 × 12 × 33 = Rs 19,80,000
• Future value (if we consider a 12 per cent annualised return): Rs 2,54,69,990

With compounding working in your favour, even a modest Rs 5,000 monthly investment over three decades can grow into a corpus of Rs 2.54 crores. So, what's the catch? It's all about time.

The longer you invest the more powerful compounding becomes.

How does this compare to making a higher investment over a shorter period? Let's take a look.

What if you invest Rs 50,000 monthly for 15 years instead?

Now, what if you decided to go big? Imagine investing Rs 50,000 every month for just 15 years. You're investing 10 times more per month but the duration is significantly shorter.

Does this strategy lead to a higher corpus or does time still trump the amount invested?

What will a Rs 50,000 monthly SIP for 15 years yield?

• Investment duration: 15 years
• Monthly SIP: Rs 50,000
• Total investment: Rs 50,000 × 12 × 15 = Rs 90,00,000
• Future value (if we consider a 12 per cent annualised return): Rs 2,52,28,800

Here, with a much higher monthly SIP, you end up investing Rs 90 lakh in total. However, the shorter duration means you won't get a similar benefit of compounding and the resulting corpus is Rs 2.52 crores.

Is time the real winner in investment?

What do these two scenarios teach us? Does investing more money really mean bigger returns? Not necessarily.

Here's the breakdown:

Investing Rs 5,000 every month for 33 years grows to Rs 2.54 crores with a total investment of just Rs 19.8 lakh.

Investing Rs 50,000 every month for 15 years grows to Rs 2.52 crores but the investment at Rs 90 lakhs is hefty.

Which one would you prefer? A strategy that focuses on small, consistent investments over a longer time or one that demands large contributions but shortens your window for growth?

The final takeaway: Time is your best friend

Here's the golden rule: The longer you stay invested; the more powerful compounding becomes.

Starting small and sticking with your investment plan can sometimes lead to far better results than a higher contribution over a shorter span.

Why? Because the key to building wealth is not just about how much you put in but how long you let it grow.

Remember, the power of compounding is what makes the magic happen. And when it comes to building wealth, Time Really Is King.

Why wait? Start your SIP today and  create your dream financial future.

• You can ask rediffGURU Ramalingam Kalirajan your questions HERE.

Ramalingam K, an MBA in Finance, is a Certified Financial Planner. He is the Director and Chief Financial Planner at holisticinvestment, a leading financial planning and wealth management company

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Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.